Commercial Invoice Explained: What It Is and Why Customs Needs It

Commercial Invoice

A Commercial Invoice is for actual shipments. It reflects the goods that are actually being shipped, with final quantities and values. It's legally binding and used for customs clearance.

When to use: For actual shipments that will clear customs and be delivered to the buyer.

Key characteristic: Must reflect actual shipped goods with accurate values. Customs uses it to assess duties and taxes.

Pro Forma Invoice

A Pro Forma Invoice is preliminary. It's used before shipment for quotes, import permits, letters of credit, or sample shipments. It may contain estimates rather than final values.

When to use: For quotes, pre-shipment documentation, samples, or when buyers need invoice documentation before actual shipment.

Key characteristic: Not legally binding for payment. Serves informational or procedural purposes.

Shipper (Exporter) Information

Complete contact information for the person or company sending the shipment:

• Full legal name (individual or company)
• Company name if applicable
• Complete street address (not P.O. Box)
• City, state, postal code, country
• Tax ID (EIN for U.S., VAT for Europe, or equivalent)

Why it matters: Customs uses this to verify the shipper's identity and tax status. Missing tax IDs are a common cause of customs holds.

Consignee (Importer) Information

Complete contact information for the person or company receiving the shipment:

• Full legal name
• Company name if applicable
• Complete street address
• City, state, postal code, country
• Tax ID (VAT, EORI, or equivalent—required for most countries)

Why it matters: Customs needs this to assess duties and taxes. The consignee is typically responsible for paying import fees.

Invoice Details

Basic invoice information:

• Invoice number (unique identifier you create)
• Invoice date
• Terms of Sale (Incoterms: DAP, DDP, FOB, etc.)
• Currency code (USD, EUR, GBP, etc.)
• Reason for export (sale, gift, sample, return, etc.)

Why it matters: These details help customs understand the nature of the transaction and who's responsible for shipping costs and duties.

Line Items (Product Details)

Each product in your shipment needs detailed information:

• Item description (specific, not vague)
• Quantity
• Unit value (price per unit)
• Total value (quantity × unit value)
• HS Code (6-10 digit classification code)
• Country of origin (manufacturing country, full name)

Why it matters: Customs uses this to classify goods, calculate duties, and verify compliance. Incomplete line items are a major cause of customs holds.

Totals and Declaration

Final section includes:

• Total invoice value (sum of all line items)
• Shipping costs (if applicable)
• Total amount
• Signature (required for most shipments)

Why it matters: Customs uses the total value to calculate duties and taxes. Missing signatures can cause rejection.

Product Classification

Customs reads the product descriptions and HS codes to determine what you're shipping. They verify that the description matches the HS code. If there's a mismatch, they'll hold the shipment for clarification.

For example, if your description says "wireless headphones" but your HS code is for "clothing," customs will question the classification. They need consistency between description and code.

Duty and Tax Calculation

Customs uses the HS code to look up duty rates and the invoice value to calculate how much you owe. They also check the Incoterms to determine who's responsible for paying.

If the invoice says DDP, customs knows duties are already paid. If it says DAP, they know the buyer needs to pay. Incorrect Incoterms lead to confusion and delays.

Compliance Verification

Customs checks if your products require special permits, certifications, or are subject to restrictions. They use the HS code and product description to identify these requirements.

For example, certain electronics might require FCC certification. Certain food products might require import permits. Customs uses the Commercial Invoice to verify you have the necessary documentation.

Risk Assessment

Customs uses the invoice to assess risk. High-value shipments, certain product types, or shipments from specific countries might get extra scrutiny.

Incomplete or suspicious invoices trigger inspections. Accurate, complete invoices help your shipment clear customs faster.

Trade Statistics

Governments collect trade data from Commercial Invoices. They track what products are being imported, from where, and at what values. This data informs trade policy and economic analysis.

Mistake 1: Missing Tax IDs

Customs needs tax identifiers for both shipper and consignee. Without them, shipments get held for verification. This is one of the most common causes of delays.

Always include EIN (U.S.), VAT (Europe), EORI (EU), or equivalent tax IDs. Even if your country doesn't require them, the destination country might.

Mistake 2: Vague Product Descriptions

Descriptions like "electronics" or "clothing" aren't specific enough. Customs needs detailed descriptions to classify goods correctly.

Use specific descriptions: "Wireless Bluetooth headphones, model XYZ" instead of "electronics." Include brand, model, and key specifications when relevant.

Mistake 3: Missing or Incorrect HS Codes

Every product needs an HS code. Missing codes or wrong codes cause customs to hold shipments for clarification or misclassify products, leading to incorrect duty calculations.

Use accurate 6-10 digit HS codes for each product. Verify codes through official sources or customs brokers, especially for complex products.

Mistake 4: Wrong Country of Origin

Country of origin means where goods were manufactured, not where they're shipping from. Getting this wrong causes incorrect duty calculations.

If you're shipping from a warehouse in Country A, but goods were made in Country B, the origin is Country B. Use full country names, not abbreviations.

Mistake 5: Incomplete Line Items

Missing quantities, values, or country of origin for individual items causes delays. Every item needs complete information.

Double-check that each line item has description, quantity, unit value, total value, HS code, and country of origin.

Mistake 6: Incorrect Incoterms

Wrong Incoterms misrepresent who pays for shipping and duties, leading to disputes and incorrect duty assessments.

Use correct Incoterms (DAP, DDP, FOB, etc.) based on your sales agreement. Specify the delivery point clearly: "DAP New York, USA" not just "DAP."

Mistake 7: Missing Signatures

Many countries require signed invoices. Unsigned documents get rejected or held. Some accept digital signatures, others require physical signatures.

Check destination country requirements. When in doubt, print the invoice and sign it physically before including it with your shipment.

Mistake 8: Format Mismatches

Carriers have specific format requirements. Using the wrong format can cause carrier rejection even if the information is correct.

FedEx, DHL, UPS, and USPS each have slightly different format expectations. Use templates that match your carrier's requirements.

Carrier Requirements

FedEx, DHL, UPS, and USPS each have specific format expectations. The basic information is the same, but layout and field placement can vary.

Using a template that matches your carrier's format reduces the risk of rejection. Most carriers provide sample invoices on their websites.

Country Requirements

Some countries have specific requirements. For example, some require invoices in the destination country's language, or specific field labels.

Check destination country customs websites for specific requirements. When in doubt, include more information rather than less.

Language Requirements

Most countries accept invoices in English, but some require the destination country's language. Check requirements before creating your invoice.

Even if the destination accepts English, using the local language for field labels can help customs process your shipment faster.